Giuliani Loosened Ball Clubs' Leases Days Before Exiting

By JENNIFER STEINHAUER

Published: January 15, 2002

As part of his last-minute agreement with New York City's Major League Baseball teams to build each a new stadium, Mayor Rudolph W. Giuliani quietly amended each team's current lease, giving the Yankees the right to leave the city on 60 days' notice if the team does not get a new stadium, and releasing the Mets from paying the city large sums of advertising dollars.

It was not clear last night whether Mayor Michael R. Bloomberg, who has expressed doubt that any new stadiums will be built soon because of budgetary constraints, knew of the lease amendments. Just days before leaving office, Mr. Giuliani signed an agreement to build both teams new stadiums and announced with great fanfare that the city would share the costs. Although Mr. Giuliani presented several terms of the deal, which is nonbinding and subject to Mr. Bloomberg's approval, he did not mention that his administration had amended the leases.

Yesterday, the city's comptroller, William C. Thompson Jr., released a letter to Mr. Bloomberg denouncing the new leases, calling them ''troubling.'' He added that Mr. Bloomberg should reject the stadium plan, saying: ''I urge you to negotiate new lease amendments with the teams which protect the city's financial interests.'' Mr. Thompson, referring to a plan for rent reductions, also said that the city should not be paying each team $5 million a year for the next five years to cover planning costs, expenses that he said would not have to be approved by the city in advance.

Under the terms of the amended Yankees' lease, the team may break its lease on 60 days' notice at any time after the last day of this year, if it believes that the city will not follow through on the new stadium.

That is a significant shift and considerable leverage for the Yankees, whose prior lease, which would have expired at the end of the year, required them to decide whether to stay by the end of this season. Now, the team has agreed to stay through 2005, but it could threaten to exercise its 60-day privilege if the Bloomberg administration does not at some point commit to the deal.

Edward Skyler, Mr. Bloomberg's spokesman, last night declined to comment on Mr. Thompson's letter, saying only that the stadium plan would continue to be studied by the mayor and considered when the city's financial situation improved.

On the day Mr. Giuliani announced the deal with the teams, he volunteered that there was no escape clause in the agreement. ''I think the amendment speaks for itself,'' said Lonn A. Trost, chief operating officer of the Yankees. ''The intent is to build a new stadium and this is part and parcel,'' of that goal, he added.

In the case of the Mets, their new lease releases them from paying a percentage of the revenues generated from television ads behind home plate as of last year. Those revenues were in contention for several years; in 1995, the city said that they owed $83,000 for the revenues, and the number was roughly the same each year. The Mets never paid any of it, arguing that it did not owe the city those revenues. ''Our feeling on this issue is that since 1996, our rental payments have risen quite dramatically,'' said David Howard, senior vice president of the Mets. ''We were paying Park Avenue prices for a substandard facility.'' The team was also released from any future obligation to pay the city for portions of licensing revenues from telecasts, something Mr. Howard and others described as ''negligible.''

An official from the Giuliani administration said last night said that if the former mayor had not renegotiated the leases, the Bloomberg administration would have been obligated to negotiate with the team immediately. ''It gives them breathing room to determine whether they want to pursue the deal,'' said Robert M. Harding, who was a deputy mayor when he brokered the deal. Even so, if the Yankees chose to leave the city, the team would have had to scramble to find a new stadium, a process unlikely to be finished in under two years.

Under the plan for the new stadiums, each team would get a $5 million rent reduction for costs associated with planning the new stadium, something Mr. Bloomberg agreed to honor. But he has made clear that new stadiums will take a back seat to other needs as the city faces a roughly $4 billion budget gap next fiscal year.

Mr. Giuliani, who had characterized Mr. Bloomberg as on board with his plans for the new stadiums, argued that they would generate revenues because the city would receive 4 percent of gate receipts from Mets and Yankees games and 35 percent of net revenues from nonbaseball events, excluding parking fees.

Last night, baseball officials said that the newly disclosed amendments were reasonable when rewarded with commitments to stay -- the Mets lease was further extended from the last day of 2004 to the last day of 2005, with five one-year renewal options.

Marc Ganis, president of Sportscorp, a Chicago consulting firm, agreed in part. ''What the Yankees are doing is saying that if the stadium is not moving forward, then it is reasonable,'' to leave, he said. But about the ad revenues that the Mets can now keep, he added: ''That seems to be a real concession. I don't see what the city got for it.''

The $5 million a year in rent reductions for each team, he said, ''is a fair amount of money, and a way of expending $10 million a year on planning for a new stadium without having to include it in the city budget.''

Mr. Thompson took a similar view. ''The amendments do not provide the city with pre-audit authority over the level and nature of spending of $50 million over five years,'' he said in his letter to the mayor. He also wrote: ''I question why the city chose to forgo advertising and cable television fees owed by the Mets that were identified in comptroller's audits and supported by the New York City Law Department.''